Observations focused on the problems of an underdeveloped country, Venezuela, with some serendipity about the world (orchids, techs, science, investments, politics) at large. A famous Venezuelan, Juan Pablo Perez Alfonzo, referred to oil as the devil's excrement. For countries, easy wealth appears indeed to be the sure path to failure. Venezuela might be a clear example of that.

Oil is a curse. Natural gas, copper, and diamonds are also bad for a country’s health. Hence, an insight that is as powerful as it is counterintuitive: Poor but resource-rich countries tend to be underdeveloped not despite their hydrocarbon and mineral riches but because of their resource wealth. One way or another, oil — or gold or zinc — makes you poor. This fact is hard to believe, and exceptions such as Norway and the United States are often used to argue that oil and prosperity can indeed go together.

The rarity of such exceptions, however, not only confirms the rule, but also serves to clarify what it takes to avoid the misery-inducing consequences of wealth based on natural resources: democracy, transparency, and effective public institutions that are responsive to citizens. These are important preconditions for the more technical aspects of the recipe, including the need to maintain macroeconomic stability, prudently manage public finances, invest part of the windfall abroad, set up “rainy-day funds,” diversify the economy, and ensure the local currency does not reach too high a price.

It all sounds sensible, and a recent book edited by Jeffrey Sachs, Joseph Stiglitz, and Macartan Humphreys, Escaping the Resource Curse, synthesizes the consensus about what countries beset by the combination of rich subsoil and poor institutions should do. As Brazil, Ghana, and others are soon likely to become major oil players for the first time, they will provide rare real-life test cases of these recommendations.

Unfortunately, for most underdeveloped countries, the suggested defenses are as utopian as the larger goal they are supposed to help achieve. Countries that already have all these institutional strengths need not worry. For the rest, like an autoimmune disease, the curse undermines the ability of a country to build defenses against it. Indeed, we’ve learned in recent years that concentrated power, corruption, and the ability of governments to ignore the needs of their populations make it hard to do what it takes to resist the resource curse.

Juan Pablo Pérez Alfonzo, Venezuela’s oil minister in the early 1960s and one of the founders of OPEC, was the first to call attention to the oil curse. Oil, he said, was not black gold; it was the devil’s excrement. Since then, Pérez Alfonzo’s insight has been rigorously tested — and confirmed — by a slew of economists and political scientists. They have documented, for example, that since 1975 the economies of resource-rich countries grew at a slower rate than countries that could not rely on the export of minerals and raw materials. And even when resource-fueled growth takes place, it rarely yields growth’s usual full social benefits.

A common trait of resource-based economies is that they tend to have exchange rates that stimulate imports and inhibit the export of almost everything except their main commodity. It’s not that their leaders fail to realize they need to diversify their economies. In fact, all oil countries have invested massively in the development of other sectors. Unfortunately, few of these investments succeed, largely because the exchange rate stunts the growth of agriculture, manufacturing, or tourism.

Then there is the intense volatility of the commodities that these countries export. In the last 24 months, for example, oil shot up from less than $80 per barrel to $147.27, then fell to $32.40, and again moved up, to $59.87 by mid-2009. These boom-and-bust cycles have devastating effects. The booms lead to overinvestment, reckless risk taking, and too much debt. The busts lead to banking crises and draconian budget cuts that hurt the poor who depend on government programs. To make matters worse, governments faced with a windfall of revenues feel pressure to launch plans that are larger and more complex than their bureaucracies can handle. Inevitably, the overambitious projects end up generating enormous waste and are often abandoned once revenues drop.

What’s more, the oil industry is highly concentrated and capital intensive. This means that oil-fueled growth does not create jobs in volumes commensurate with oil’s large share of the economy. In many of these countries, oil and natural gas account for more than 80 percent of government revenues, while these sectors typically employ less than 10 percent of the country’s workforce. Inevitably, this leads to high income inequality.

Perhaps even more significantly, the oil curse also nurtures bad politics, and herein lies its autoimmune nature. Because governments of such countries do not need to tax the population to amass giant fiscal revenues, their leaders can afford to be unresponsive and unaccountable to taxpayers, who in turn have tenuous and often parasitic links with the state. With their ability to allocate immense financial resources pretty much at will, such governments inevitably grow corrupt.

This explains why the many sovereign wealth funds, oil-stabilization funds, and other solutions tried by resource-rich countries to avoid the effects of volatility, fiscal excess, indebtedness, export-inhibiting exchange rates, and other problems have rarely worked. Such funds either get raided before the rainy days or squandered in poor investments. Almost no resource-exporting country has been able to prevent its exchange rate from undermining the international competitiveness of its other sectors.

Once in power, oil-rich governments are deadly hard to dislodge. They stick around by spending their vast public resources to buy out or repress their political opponents. Statistically, it is far less probable that an authoritarian oil country will transition to democracy than that a resource-poor autocracy will. Oil-rich governments spend two to 10 times more on their militaries than countries without oil and are more prone to go to war. Most oil-exporting countries that do not have strong democratic institutions before they start exporting crude inevitably create an inhospitable environment for democracy.

One promising new idea is to force multinational corporations to be more transparent about their contracts, investments, tax payments, and revenues in poor countries. The premise is that more transparent information will curtail the ability of unaccountable politicians to use national resources as if they were their own. Not all multinationals are accountable and willing to play by these rules, however, and it takes more than the threat of posting a report on the Internet to stop a deeply entrenched kleptocracy from stealing.

So, is all hope lost for poor countries with rich natural resources? Not quite. Chile and Botswana stand out as success stories on continents where the resource curse has otherwise wreaked havoc. Their experiences confirm what we know is needed to inoculate a country from the oil curse. But why they were able to do so is still a mystery. Answers such as “good leadership,” “strong governance,” and “reliable institutions” only serve to mask our ignorance. Unlocking the secret of what enabled these two poor countries to successfully lift the resource curse can spare millions from the devil’s excrement. But nobody has done it yet.

The future of one of the world’s biggest oil auctions is in jeopardy as Venezuela’s socialist government and oil companies remain at loggerheads over terms to develop a key oil field.

Repeated delays in the bidding for rights to exploit the Orinoco Belt – which was postponed for a third time at the end of last month – reflect investor concerns about political risk, onerous financing costs and the profitability of the projects. Lower oil prices and a stuttering global economy only add to the problem.

Chinese, Russian, Indian and Brazilian state oil companies are competing alongside oil majors such as Shell, BP, Chevron, Total, Eni and Statoil for access to the Orinoco’s Carabobo block, which could require collective investment of between $30bn and $50bn (€34.5bn, £30.6bn) in three projects together potentially producing up to 1.2m barrels per day.

“There is a high level of interest. The Orinoco Belt is just too large to be ignored, with no geological risk but huge potential,” said Rodolfo Guzmán, a management consultant at Arthur D. Little in Houston. Low production costs and a lack of alternatives elsewhere in the world add to the Orinoco’s attractions.

But in spite of this being the first opportunity to invest in Venezuela’s vast oil reserves in more than a decade, enthusiasm has been tempered by a long list of concerns.

At the top of the list were fears about the unstable political climate in Venezuela and the unpredictability of President Hugo Chávez as he championed his socialist revolution.

“Security is still the big X-factor,” said Pietro Pitts, the Caracas-based editor of Latin Petroleum Magazine. “Scarcely a month goes by without the government taking over another private company,” he said, highlighting the expropriation of the assets of more than 70 oil service companies this year.

Worries about the sanctity of contracts were deepened by the fact that tax rates for oil companies have been increased four times since 2004, while PDVSA, the Venezuelan state oil company, has been negligent at paying dividends to partners in joint ventures.

Such concerns explain why companies were insisting on having the right to settle contract disputes in international courts, particularly after ExxonMobil and ConocoPhilips saw fit to bring billion-dollar claims against Venezuela after Mr Chávez went on a nationalisation spree in 2007.

But PDVSA is believed to be reluctant to comply, arguing that this would compromise national sovereignty – even though international arbitration clauses were included in contracts signed with investors from Russia, a close ally of Venezuela.

Another serious obstacle relates to the stiff financial terms, particularly with tough conditions in international credit markets. In spite of companies being allowed at most a 40 per cent share in each of the projects up for auction, with PDVSA maintaining 60 per cent, they are being asked to fork out 100 per cent of the financing.

The fiscal terms are equally hard to swallow, with 33 per cent royalty rates and a newly introduced windfall tax generating deep disquiet.

On top of that the projects require high start-up costs, in particular because of the need for complex and expensive refineries known as upgraders necessary to process the tar-like “extra-heavy” oil found in the Orinoco.

“As a publicly traded company we need a minimum return on our investment,” said the local head of one of the oil majors bidding, questioning whether this would be feasible under the current terms and market conditions.

As Mr Guzmán put it: “For many companies here it’s going to be very hard to convince their bosses at home to put a serious offer on the table.” Given that PDVSA will have operational control of the new projects, the argument will be even harder to make, with many companies dissatisfied with their current joint ventures with the Venezuelan group.

Such attitudes have generated speculation that the bid round could attract very few serious offers and might even need to be suspended.

Others argued that even if private companies shy away, national oil groups from countries such as China and Russia remain committed.

A representative in Caracas of one of the state oil companies bidding said in spite of the high costs involved, national energy security is the overriding consideration.

“The project may require serious investment, yes, but given that there is no exploration risk and that this could be the last project of its size left in the world, we can’t afford not to get involved.”

Protesting in the streets of Venezuela is, from now on, synonymous with crime.The Venezuelan Attorney General Luisa Ortega, has announced it will open proceedings against all those citizens who “protest for any reason” and that in hher opinion, only seek to “destabilize the constitutionally elected Government.“I wish that those who rise up in hostility against the constituted Government , should know what are now consequences,” Ortega said, while she moderated her owm radio program “in line with the Public Ministry”, which airs every Friday at a state broadcaster . Her opinion is that (these) behaviors fit perfectly into the crime of civil rebellion “that under Venezuelan law is punishable by 12 to 24 years in prison.

The aim is to establish that marches are civil rebellion

AIn early July, also through her program, Luisa Ortega also proposed that Parliament approve a controversial “crimes against media law” to punish the media for disseminating information that “incited hatred” or generated “anxiety” among the population.

The first “rebels” at the discretion of the prosecutor, are already behind bars.The prefect of the city and 11 workers from the office of Mayor of Caracas, governed by opposiont’s Antonio Ledezma, were arrested Wednesday for participating in the march which took place on Saturday 22 August against the recently adopted Education Bill, which removes some autonomy from universities and establishes a system to establish the “new consciousness” at socialist schools.. All were accused of “obstructing public roads”, “incitement to crime” against police and injuries.According to the prosecutor, this protest, which involved thousands of Venezuelans, was convened by the parties of opposition and civil society organizations to generate “a climate of violence” and “create a scenario similar to the 11 and 12 April 2002, when there was the coup in Venezuela that removed Hugo Chávez from power for 48 hours.

The statements by the Prosecutor has been nothing but another sign in the marked tendency of the government of Hugo Chávez for the criminalization of protest. Since 2007, at least 300 students have been arrested for participating in demonstrations against the closure of private TV channel Radio Caracas Television and against the constitutional reform proposed by Chavez to establish the indefinite re-election since then, 256 of them have to present themselves regulraly in fron of a judge regularly and are banned from leaving the country.

Both President Chavez and Prosecutor Diaz have criticized the union of journalists, who is also ready to protest against the growing threats to freedom of expression in Venezuela. Two weeks ago, 12 reporters were assaulted with sticks and stones by a group of Chavez’ supporters while distributing leaflets in downtown Caracas, against one of the articles of the new Education Bill which provides for the immediate closure of media to disseminate content generate “terror” in children.

Chavez justified the beating, saying that this protest was a “provocation” against the people, while the prosecutor said that the journalists involved in such acts cease to be journalists and become politicians.The person responsible for this aggression, only one worker was arrested Avila state TV channel, was released a week later.

There is no hiding the fact that last Saturday’s march in rejection of the new Education Bill has unsettled the regime’s nerves. In the span of one week, the regime has jailed 12 peaceful protesters, including tonight the jailing of the “Prefecto” of the Metropolitan District (The highest civil authority below the Mayor), as the Government continues searching for Oscar Perez, one of the organizers of last Saturday’s march, who will be charged for nothing more than…organizing it.

And while the only person charged in the attack of the Cadena Capriles reporters is at large, released on his own recognizance, al of these people are being sent to jail, including Prefect Richard Blanco, being sent to the Yare jail, the same one where Hugo Chavez was sent to after his 1992 bloody coup attempt.

And this is now state policy as clearly oulined and defined by the ineffable and fascist Prosecutor Luisa Ortega, who threatened to jail those “citizens that march for any motive”, altering peace with the only purpose of destabilizing the Government. Truly remarkable fascist logic by the person in charge of defending the country’s laws.

In fact, as if this was not enough Ortega suggested that marching and protesting may even be considered civil rebellion, which carries a penalty from 12 to 24 years.

Of course, when a peaceful opposition march is attacked by Chavistas hiding at a school (on a Saturday?) in San Cristobal, nothing happens. This does not create panic or fear. I imagine in the Prosecutor’s fascist mind, the marchers deserve the treatment. It’s the new “Double Way” of XXIst Century Facism in Venezuela.

And as if this was not enough, even passive criticism of the Government is now being persecuted, as in the case of the medical doctor who dared suggest that four people had died from swine flu at her hospital and may be charged with “providing false information…which may cause panic or anxiety in the population”. (She is not the first one to question Venezuela’s numbers on swine flu which are considered to be statistically quite low)

This is all aimed at intimidation: Organize a march, you may be sent to jail, speak against the Government, you may be sent to jail, write criticizing the Government, I may be sent to jail.

It’s a new phase, the criminalization of protest and dissent, a continuation of the dictatorial and fascist ways that the robolution has been implementing more and more as its popularity drops and the economy coems apart at the seams.

After a couple of weeks of threats against Colombia from economic blockade to war and his promise that he would show the world how dangerous Colombia’s agreement with the US is, not even his buddies, including the revolutionary ones, bought the story and despite the Dictator’s claim that he had achieved everything he wanted to, this was very far from the truth.

Chavez spent his time backing up his claims with an academic white paper that does not represent US policy but apparently Ms. Golinger sold to him and his advisers as the Rosetta stone on US strategies. But it was one of hundreds of such papers available over at the National Defense University website. Hell, as you can see on the top, just contact the staff if you want to add another white paper to the list.

In the end, there was no condemnation for the US-Colombia agreement, no mention of military bases and some, like Evo Morales and Chavez did not deliver on any of their threats that “if the agreement does not contain x,y, or z” they would not sign. None of their demands were included and they all signed.

I managed to watch bits of the Unasur meeting at lunch time and I think I watched the best highlights from everything I have read. From an overall point of view, it is clear that there is a fairly professional class of Presidents in South America led by Lula Da Silva, who appeared impatient and with better things to do. In the end he even said it, as he blasted Ecuador’s President Correa for giving a speech for the gallery and trying to grab the limelight.

But it is clear that Brazil, Chile and Argentina know well that the US is their main customer and they do not want to upset those relations, while they are getting tired of Hugo’s antics, jokes and “I am going to be brief” speeches. Lula reportedly convinced Chavez not to create a crisis, but this seems to be the story of Chavez’ life at these summits, someone convinces him to be the sheep he has always been when another President is in the same room.(Or when someone confronts him like February 1992 or April 2002)

Evo Morales was absolutely pitiful, blaming all but his haircut on US imperialism. Correa was clearly “on” lying once in a while to show us all what a great job he has done as President, but with little substance.

I was surprised at Alan Garcia, who gave a very in your face speech, essentially blasting everyone around for holding a summit on such a narrow topic. His best quip was to say something like ” While we all claim to love our people, we spent US$ 38 billion in weapons last year”. You had to love that one even if coming from a man which such a corrupt past. He also laughed at Chavez asking him why would the “US want to dominate your oil if you sell it all to them”. There were smirks and laughs all around the table and the snide by Garcia and Chavez’ defense after the meeting was equally pitiful, arguing that Venezuela does that because it has “10,000 gas stations and seven large refineries in the US”. Another fib by Chavez, who should know as Gustavo Coronel points out today that there are only three left (Hugo sold them!) and the 10,000 gas stations use CITGO gas and sign, but are independently owned. Moreover, Venezuela still exports more oil than even the seven original refineries used to ever consume.

Ms. Kitchner was her proper self, more concerned with the Summit being successful than saying anything with content. Ms. Bachelet had more substance than most, making more realistic and practical proposals with substance.

Uribe as usual held his ground, responding with facts and refusing to yield on Colombia’s right to reach an agreement with any country it wants. AS Correa criticized Colombia ‘s asylum of Carmona, Uribe snapped back, saying he could not compare a legal process that took place in his country with the fact that the top two leaders and terrorists of the FARC are currently in Venezuela and that information has been provided to the Venezuelan Government and nothing has been done.

In the end, I came away with the feeling that they were divided in three groups and only Peru, Chile and Colombia have given any serious thought to Latin American integration. Venezuela, Ecuador and Bolivia are trapped in blaming everything on the US and most of our countries are focused in their own problems and politics.

In the end, it was a waste of time, a step back for whatever Unasur wants to be and a clear demonstration that our fascist Dictator has fewer and fewer pieces of clothing and most of those at the Unasur meeting are tired of him.

It’s hard to write about Venezuela sometimes. The double discourse of Chavismo is so cynical, that sometimes words can not describe the outrage I feel sometimes. Everything is so manipulated, justice inexistent except for the goals of the fake revolution. But just as I am convinced that it can not get any more bizarre, it does.

Take the march by the workers of the Metropolitan Mayor’s office. They went to the Supreme Court, walking, they are three or four blocks apart, to ask the Highest Court in the land for Justice. Essentially the new Metropolitan area law, issued by Chavez to screw the opposition Metropolitan Mayor, has taken away some rights from them. It does not matter which ones, for this discussion or whether we agree or not. That’s besides the point

What matters is that they went to the Highest Court of the Land, accompanied with lawyers and with a written request: Can the Court protect us?

Except they did not get a Justice, or a clerk to meet with them. Somehow, in the paranoia of the regime, thirty people walking towards the Supreme Court represents a threat and they got gassed over and over. And to top it all off, they arrested eleven of the protesters.

Let’s compare that, with Chavez’s buddy, supporter and terrorist Lina Ron. The day she went to Globovision, she was accompanied by around 40 of her buddies in motorcycles. They threw smoke and tear gas bombs, invaded the TV station and intimidated and terrorized those inside the TV station.

After the scandal and the images seen worldwide, Lina Ron was arrested, but she was the only one. One out of forty people who would be considered criminals and terrorists in any civilized country. The Government had no recourse but arrest her. But they never said anything abut the other three dozen terrorists who are still at large, despite being taped live while they attacked. And the Government knwos who they are, they are all members of the La Piedrita gang.

And the double standard continues with the attack on the reporters from Cadena Capriles, which I noted in this post, showing how the Chavistas attacked the reporters. Once again, despite the pictures and videos and the fact that the attackers were identified as being workers of Government sponsored Avila TV, only one, just one of the attackers was charged. And he is already out on the streets!

Contrast this with the poor soul who was driving a van helping the students during a protest months ago and was accused of carrying Molotov cocktails. Despite the fact that there are videos showing the Captain of the police planting the gasoline containers in the van, this poor soul is still in jail. And he is sick and they don’t want to allow him to leave jail to be taken care of.

And then there is the bizarre case of Richard Blanco, who is the civil Governor (Prefecto) of the Metropolitan Mayor’s office. Blanco was present at last Saturday’s march and yesterday he was arrested for damaging the barriers used in containing the demonstration that day.

Imagine that! First of all, how could they pinpoint him exclusively? Second, videos clearly show that the barrier was penetrated due to the action of Colonel Benavides, who ordered the repression of the march. So, who is to blame more, Blanco or Benavides?

But the charges against Blanco are so ridiculous, because if damaging the Government’s property was enforced, Chavez should be in jail forever for his wholesale destruction of Venezuela, Maletagate players should be in jail as they are investigated (which tehy are not), including the Minsiter of Energy and Oil who had to approve the US$ 800,000 in the suitcase, as well as paying for the flight, or the guy who built the bridge in Bolivar State which collapsed last week as it was being inaugurated. Or how about the six dollar books which Venezuela bought in Uruguay for four hundred dollars a piece? In this case, you can be sure that the dollars were also acquired at Bs. 2.15 per dollar. The revolution always has money for such shenanigans.

But in the end, Chavismo has divided its discourse, its justice, its actions, the people of Venezuela in two. If you are with the “process” and the Dictator, you can do what you want. But if you oppose them and stray one centimeter, they will find a way to get at you. No matter how ridiculous the charge may be.

It’s discrimination at its best, its fascism, its a two class system, which has nothing to do with social level, poverty, education, but just has to do with beliefs and opinions.